Insight & Analysis

Innovate or be left behind

Published: Nov 2019

Treasury’s future could be at risk if it remains in its current state of inertia. That’s just one of the key findings from Nordea’s recent 2019 Treasury KPIs Report. In light of this worrying claim, what factors lay behind the report’s conclusions, and what can treasury do in order to stay relevant?

Person putting a light bulb ontop of a stack of coins, which is causing it to light up

Since Nordea’s last KPI report was published back in 2016, the challenges of using KPIs in order to evaluate treasury’s own performance or benchmark against peers has not gone away. In fact, very little has changed with regard to KPI evaluation, despite the accelerating pace of digitisation.

In addition, with corporate social responsibility (CSR) increasingly becoming a focus across many organisations, CSR is falling down treasury’s agenda, while hardly any treasuries have implemented KPIs related to their digitisation goals. If Nordea is correct in its assessment that treasury is staying stagnant, rather than moving forward, it’s certainly a worrying state of play.

The positives

It would be wrong to assume that it’s all doom and gloom, however.

According to the report, around 77% of treasuries have established KPIs. These are crucial for maintaining and improving treasury performance and proving value to the wider business and stakeholders. Most of these KPIs are still within parameters from the treasury policy, but the number of treasuries using specific KPIs to track treasury performance has risen to 46%, up from 27% in 2016.

This is a good sign, as it means that treasurers who are measuring performance are doing it more robustly, with specific and clearly defined goals. That said, less than half of treasuries have specific KPIs – and worryingly, only a quarter (25%) have shared KPIs with business areas/subsidiaries.

The report claims that if treasuries want to have more strategic influence within the wider business, they urgently need to align their priorities. ‘As it stands, it appears that many are finding themselves in a position where they’re siloed from the rest of the business,’ the report states.

On a more positive note however, treasury does have the attention of business leaders. In fact, treasury’s KPIs are most likely to be set by the board (32%), followed by the CFO (28%) and the treasury itself (19%). Furthermore, 46% of treasuries report KPI outcomes to the board, and a significant proportion (30%) report them to the CEO. This all signifies that the business is keeping a watchful eye on key financial and risk metrics. ‘This could be an opportunity; but it’s up to the treasury to start proactively managing this relationship,’ the report notes.

The negatives

Unfortunately, the report also notes that although treasuries are using KPIs, they’re not evaluating their own performance because they are so focused on key risk metrics – not to mention treasurers simply not having enough time to look at the bigger picture. This is a missed opportunity, as KPIs can be extremely useful in defining staff success, and thereby driving better performance and results.

Furthermore, only 35% of treasuries are regularly measuring stakeholder satisfaction, a 5% drop from 2016. What’s even more striking is that only 7% of treasuries are using KPIs to benchmark their performance against their peers. “This reinforces the perception that treasury is detached from the wider business, but treasuries need to drive the agenda if they want to be a strategic entity,” says Johan Trocmé, Head of Thematics, Nordea.

He continues. “You can hardly argue that treasurers don’t think digitisation is important, but it’s more a matter of ‘has it been formalised?’ Have they embraced it to the extent that they have set strategic objectives to be achieved for the treasury?”

This desire to be a strategic entity is also not being helped by treasury failing to acknowledge CSR. Despite issues such as climate change, sustainable finance and diversity being high on the agenda – and likely to be even more of a focus in coming years – the number of treasuries that say they have KPIs for CSR has dropped to 4%, down from 15% in 2016. In particular, areas like sustainable finance represent an important opportunity, and it’s an area where treasury can take action and get behind the steering wheel.

Finally, the report concludes that treasuries aren’t prepared for digitisation just yet. While data-driven insights are radically transforming business models and markets, and technologies such as AI, robots and cloud-based applications are leading the charge, only 6% of treasuries have KPIs for digitisation. The most anticipated areas for supporting the company’s digital transformation in the short term is in credit scoring (23%), and offering payment solutions in different channels in the long-term (42%).

The solution

The report concludes by outlining four main recommendations for treasurers seeking to stay relevant:

  • Check your strategic direction – It is important to stay on the same page as the business and to establish formal KPIs that are strongly aligned with company goals.

  • Evaluate your people – Have some KPIs that measure department performance. Use these to inform appraisals and identify areas for upskilling.

  • Make digitisation a priority – It is going to happen anyway, so treasury is best off taking the lead. Develop a clear digitisation strategy and investigate and deploy technologies that will deliver efficiencies, freeing up teams to focus on a wider range of strategic KPIs.

  • Don’t forget the bigger picture – Take the lead in other areas that are going to grow in importance, like sustainable finance and CSR. If it matters to the business, it should matter to the treasury.

Note: More than 160 Nordic and international corporates took part in the Treasury KPIs survey, with respondents primarily spread across Sweden, Denmark, Finland and Norway.

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